When it comes to the overall market, the song remains the same—the major indexes are in steep uptrends, our trend-following measures are bullish and many longer-term indicators and studies point to the bull market having months of upside ahead.
In the very (very) short-term, we have seen sellers put up a bit of resistance since Wednesday morning, with pushes into the 7,450 area bringing some sellers. It’s not much, and we certainly can’t say it’s meaningful yet, but it’s the first time the Nasdaq has taken more than a few-hours breather in 2018.
Beneath the surface, we are beginning to see some hesitation in more and more stocks; actually, it started last week when we had a handful of Top Ten stocks trip their stops. It’s not totally surprising to see this, partly because of the recent big advance, partly because small caps have been lagging, and partly because earnings season (and all the wildness that goes along with it) is underway.
We don’t view this as a major red flag, but it is a reminder to take things on a stock-by-stock basis, honor your stops, and perhaps most importantly, have a plan for what you want to do should your stocks retreat (on earnings or otherwise).
Beyond that, we’re very intrigued by the recent power in biotech stocks—the group was the leader from 2012 to 2015 but then had a 40% correction and a long, slow, tedious recovery during the past two years, with lots of false starts. Now the buyers are pouring in, and we expect to see some solid opportunities there in the days and weeks ahead.
All told, though, not much has changed with our outlook (short-term strong, but extended; long-term bullish) or recommended positioning (heavily invested). You should continue to ride your winners and aim to make hay while the sun shines.
BUY IDEAS
Charles Schwab (SCHW 54) staged a decisive, huge-volume breakout after Thanksgiving, took December off, and then surged as high as 56 on excellent volume in mid-January. It’s begun to pull back a bit and is approaching its 25-day line—we think it’s buyable here or on dips toward 53, with a stop around 50.5.
Freeport McMoRan (FCX 20) has been choppy during the past three weeks, but really, the stock has simply gone straight sideways after romping from 15 to 20 in December. We’re OK taking a stab at it here with a stop near the 50-day line. If you want to be a bit safer, you can wait for a push above 20.5 or so, to confirm FCX’s uptrend is resuming.
G-III Apparel (GIII 39) had a great, big-volume, persistent move from early November through mid-January, but the stock has since pulled in a bit, briefly dipping below its 25-day line yesterday. It might rest a bit longer, but this looks like a buyable first dip after a persistent advance—you can use a stop near 35 if you buy.
We’ve gotten a fair number of questions about whether it’s too late to buy Netflix (NFLX 271) after that stock’s big earnings gap earlier this week. The answer: Short-term, probably, but big picture, no, as the stock just got going in January after making no net progress during the second half of 2017. At this point, we’d be looking for either a pause for a couple of weeks or a dip of 10 to 20 points as a spot to nibble.
SVB Financial (SIVB 254) is falling on earnings today, and after a good-sized run, it could pull back further next week. But right now, there’s no evidence of a major top—we think you can buy some here or on drops toward the 25-day line (near 247), with a stop around 234.
SELL IDEAS
On the sell side, we have four outright sells: Etsy (ETSY 19), Nutanix (NTNX 34), ST Microelectronics (STM 24) and Universal Display (OLED 468).
And we continue to ratchet up our trailing stops on many stocks as they kite higher.
SUGGESTED STOPS
AbbVie (ABBV 118) near 101
Abiomed (ABMD 235) near 208
Adamas (ADMS 41) near 34
Alcoa (AA 54) near 50
Beacon Roofing (BECN 62) near 60
Boise Cascade (BCC 45) near 40
Caterpillar (CAT 165) near 153
CBOE Holdings (CBOE 137) near 124
Conn’s (CONN 35) near 33.5
Dana Inc. (DAN 33) near 31.5
D.R. Horton (DHI 51) near 49
DXC Technology (DXC 102) near 96
E*Trade (ETFC 53) near 49.5
First Solar (FSLR 70) near 66
Flir Systems (FLIR 52) near 48
Global Blood Therapeutics (GBT 60) near 47.5
HollyFrontier (HFC 49) near 46
ICU Medical (ICUI 236) near 214
Insulet (PODD 77) near 69
KB Home (KBH 34) near 32.5
Lear Corp. (LEA 196) near 180
Lennar (LEN 68) near 65
Match Group (MTCH 34) near 30
Neurocrine Biosciences (NBIX 87) near 75.5
Polaris (PII 135) near 124
Planet Fitness (PLNT 35) near 31.5
Pulte Group (PHM 35) near 32.5
Red Hat (RHT 134) near 122
Spirit Aerosystems (SPR 100) near 91
Teledyne Technologies (TDY 198) near 183
Twitter (TWTR 23) near 22
Tyson Foods (TSN 80) near 78
Urban Outfitters (URBN 35) near 32
USG Corp. (USG 40) near 37.5
Wingstop (WING 46) near 41
YY Inc. (YY 140) near 117
Zendesk (ZEN 38) near 35